LSE calls halt to a Frankfurt merger
THE LONDON Stock Exchange (LSE) has all but ended a planned merger with Deutsche Börse to create Europe’s biggest stock exchange by ruling out a European antitrust demand, saying it has strong prospects alone.
In a bid to create a European trading powerhouse that would better compete against US rivals making inroads on their home turf, the two exchanges struck a €29 billion (R395.55bn) deal just over a year ago.
If the merger fails, it will be the latest in a series of doomed efforts at deal making by stock exchanges and the likely breakdown of the latest attempt disappointed investors, with shares in Deutsche Börse tumbling more than 4 percent in early trading and LSE shares down 3 percent.
In a highly unusual step, the LSE on Sunday pre-empted a European Commission antitrust decision, saying it was unlikely to give clearance for the merger after the London bourse had refused to sell an electronic trading platform in Italy.
A deal would now only be possible if the commission, which declined to comment, were to change its demands – an outcome that is unlikely.
There had already been four attempts, two public and two informal, to combine the London and Frankfurt bourses during the past decade, while the EU blocked a $17bn (R219.65bn) tie-up between what was then NYSE Euronext and Deutsche Börse in 2012.
However, while hopes had been high that the plan to create what the head of Deutsche Börse dubbed a financial bridge between continental Europe and Britain, this had been called into question by Brexit, with German politicians demanding Frankfurt not London be the headquarters of the group, because Britain would be leaving the trading bloc.
The question over where the headquarters should be, which would have arisen had EU authorities given the deal a green light, worried LSE executives, said two sources familiar with the matter.
Britain’s departure from the EU may isolate London as Europe’s financial centre and that had turned the tables in favour of Frankfurt.
But a source close to LSE described the sale of fixed-income trading platform MTS as a key problem because such a move was firmly opposed by Rome. – Reuters